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Loss mitigation

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Definition

Loss mitigation is the set of options a mortgage servicer may use to limit the loss from a default. Some options help a borrower stay in the home; others help the borrower leave without a foreclosure.

In plain English

When a loan is in trouble, the servicer may evaluate options instead of going straight to foreclosure. Those options are loss mitigation. Forbearance, a repayment plan, a modification, a short sale, and a deed in lieu are examples named on official consumer pages. This page is the umbrella, not any one option.

Technical definition

CFPB defines loss mitigation as steps to work with a borrower to avoid foreclosure and to reduce loss to the investor. Fannie Mae’s consumer glossary includes the heading.

Why it matters

Letters that say “apply for loss mitigation” are not naming a single product. They are opening this family of options.

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